Definition of three relevant economic terms. (Monetary Policy, OCR, Contractionary or Expansionary Monetary Policy,).

Monetary Policy: This is the process by which the monetary authority of a country (like a central bank) controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency. Monetary policies are generally referred to as either being expansionary or contractionary.

OCR (Official Cash Rate): This is a term used in Australia and New Zealand for the bank rate and is the rate of interest which the homogeneous central bank charges on overnight loans to commercial banks. This rate is a key tool to control the monetary policy.

Contractionary or Expansionary Monetary Policy: These are two types of monetary policies. Expansionary monetary policy is when a central bank uses its tools to stimulate the economy. That increases the money supply, lowers interest rates, and increases demand. It boosts growth as measured by gross domestic product. It lowers the value of the currency, thereby decreasing the exchange rate. Contractionary monetary policy is when a central bank uses its monetary policy tools to fight inflation. That decreases the money supply, increases interest rates and decreases demand.